In last week's Liberty Update, we highlighted the Heritage Foundation's 2022 Index of Economic Freedom…
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Image of the Day: More Economic Freedom = Higher Standard of Living

In last week's Liberty Update, we highlighted the Heritage Foundation's 2022 Index of Economic Freedom, which shows that Joe Biden has dragged the U.S. down to 22nd, our lowest rank ever (we placed 4th in the first Index in 1995, and climbed back up from 18th to 12th under President Trump).  As we noted, among the Index's invaluable metrics is how it demonstrates the objective correlation between more economic freedom and higher citizen standards of living, which this graphic illustrates:

 …[more]

May 19, 2022 • 12:53 PM

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Obama Administration Questions Others' Patriotism While Obstructing Bipartisan Corporate Tax Reform Print
By Timothy H. Lee
Thursday, July 31 2014
In his letter to Congress, Lew admits, 'The best way to address this situation is through business tax reform that lowers the corporate tax rate, broadens the tax base, closes loopholes, and simplifies the tax system.'

It may come as a surprise to many, but the United States imposes the developed world's highest corporate tax rate, with a combined federal and state average of 39.1%. 

Exacerbating matters, our corporate tax code is a hopelessly complex and convoluted one.  Among other defects, the U.S. code taxes not only domestic earnings, but overseas earnings as well, creating what Miles D. White of Abbott Laboratories describes as “a double whammy.”  As a result, domestic companies facing withering global competition increasingly must reincorporate overseas in order to survive. 

Is that somehow "unpatriotic?" 

Obama Administration Treasury Secretary Jacob Lew seems to think so.  In a letter to Congressional leaders this month, Secretary Lew proposed that the U.S. erect barriers to prevent companies from "lowering future U.S. tax liabilities": 

"Such transactions allow firms to reduce their level of worldwide taxation, but in the aggregate, they function to hollow out the U.S. corporate income tax base...  What we need as a nation is a new sense of economic patriotism, where we all fall or rise together." 

The problem with Secretary Lew's "fall or rise together" theory is that our current corporate tax code is so uncompetitive that it cultivates only the downside risk of falling, not the upside opportunity of rising.  That's why since 2005 alone, nearly fifty companies have reincorporated in countries with more hospitable corporate tax rules.  As we speak, Mylan Inc. is in the process of purchasing Abbott Laboratories’ generic drug business units in order to incorporate in the Netherlands.  Similarly, U.S. drug maker AbbVie seeks to merge with Ireland-based Shire, Walgreens is considering a switch to Switzerland and medical device enterprise Medtronic hopes to buy Ireland’s Covidien. 

And it’s easy to understand why they do it. 

Reincorporating to an overseas address results in immediate and enormous tax savings.  In Ireland, it means a savings of almost two-thirds, and in the United Kingdom, almost half.  Absent the change, American companies face a significant tax disadvantage vis-à-vis foreign competitors, whose low rates are much more rational and competitive. 

Far from "unpatriotic," as Secretary Lew suggests, companies that reincorporate are simply keeping their businesses afloat and preserving jobs in a difficult environment.  Their decisions are rational ones based on ensuring a healthy bottom line - which is exactly what they're under a legal obligation to consider as part of their fiduciary responsibilities.  Furthermore, these inversions are perfectly legal.  The law is extremely specific about the terms and conditions under which it may occur, and all of the companies above have complied with these regulations. 

The most unseemly part is that Secretary Lew understands and acknowledges the true problem.  In his letter to Congress, Lew admits, "The best way to address this situation is through business tax reform that lowers the corporate tax rate, broadens the tax base, closes loopholes, and simplifies the tax system."  Thus, he fully understands that companies reincorporate overseas in order to seek refuge from the complex and convoluted U.S. corporate tax code.  But instead of matching word with deed and putting his weight behind resolving the problem by lowering rates and reducing complexity, he pursues short-term partisan gain by engaging in divisive rhetoric.  That, more than anything that embattled companies are doing to reduce their oppressive tax burdens, could be labeled "unpatriotic." 

Equally "unpatriotic" are those in the Obama Administration and Congress who block progress toward comprehensive tax reform that liberals like Senator Ron Wyden (D - Oregon) and conservatives like Paul Ryan (R - Wisconsin) agree are critical.  For over 20 years now, Congress has debated corporate tax reform, with successive presidents and Treasury Secretaries urging action.  Despite that, the U.S. tax code has not been updated in almost 30 years.  It’s therefore little surprise that we find ourselves in our current predicament, with domestic multinational corporations holding over $2 trillion dollars overseas rather than subject it to double taxation under the highest rate in the developed world. 

Instead of accusing others of acting unpatriotically, Secretary Lew should prove his own patriotism by leveraging the power of his position and the Treasury Department to demand substantive and corrective action.  True patriotism means fixing the problem, not protracting it in order to achieve political gain while driving even more enterprises and jobs overseas. 

Quiz Question   
How many days does it take the average U.S. household to consume as much electrical power as one single bitcoin transaction?
More Questions
Notable Quote   
 
"Lawmakers continued to raise concerns about the Internal Revenue Service at a Congressional hearing this week as the agency deals with billions in misspent dollars, hefty processing backlogs, and complaints over poor customer service.Lawmakers lobbed questions at the tax-collecting agency during the House Ways and Means Oversight Subcommittee hearing.'The program has an annual improper payment rate…[more]
 
 
—Casey Harper, The Center Square
— Casey Harper, The Center Square
 
Liberty Poll   

Should any U.S. government agency have a function called the "Disinformation Governance Board" (See Homeland Security, Department of)?